Crypto derivatives can feel intimidating when you first hear about them. Terms like “funding rate,” “liquidation price,” and “leverage” sound advanced and they are, but the core idea is much simpler than most people expect.
This guide gives beginners a clear, simple introduction to perpetual futures, how they work, how to use them, and how to open your first trade on a decentralized exchange (DEX).
What Are Perpetual Futures (Perps)?
A perpetual future, or perp, is a type of trading contract that lets you speculate on a cryptocurrency’s price without owning the asset.
If you think the price will go up, you go long.
If you think the price will go down, you go short.
Unlike traditional futures, perps never expire. You can keep your position open as long as you maintain your margin and avoid liquidation. This makes perps extremely popular among both traders and protocols.
How Do Perpetual Futures Work? Key Mechanics
– Spot price tracking & funding rate
Perps aim to mirror the real market (“spot”) price of the underlying asset. To prevent the contract price from drifting away from the spot price, especially since there’s no expiry, the system uses a funding rate mechanism.
If the perp price trades above the spot price (often indicating more demand for long positions), longs pay shorts.
If the perp price is below spot, shorts pay longs.
These payments occur periodically (e.g., every 8 hours on many platforms).
– Leverage: amplifying exposure
One of the main attractions of perps is leverage. With leverage, you can control a large position with relatively little capital. For example: open a 10× long on Bitcoin with $1,000 you’re effectively controlling $10,000 worth of exposure. If the price moves in your favor by 5%, you make a 50% return (before fees and funding); if it moves against you by 5%, you lose 50%.
Because perps never expire, you can maintain leveraged exposure indefinitely, as long as margin requirements are met.
– Long vs. Short positions
Long position: You’re betting price will rise.
Short position: You’re betting price will fall.
Because perps don’t require you to own the asset, you can easily go short, something not possible with spot trading.
– Liquidation risk & maintenance margin
Because of leverage, perps carry significant risk. If the market moves against your position enough to drop your margin below a threshold (“maintenance margin”), your position can be liquidated, meaning you lose your margin.
Also, holding for a long time means exposure to funding rate which can erode profits or increase losses if the rate is unfavorable.
Why People Trade Perps
Perpetual futures offer features you cannot access with simple spot trading:
Ability to Short the Market
You can profit when prices fall, not just when they rise.
Use of Leverage
You can amplify gains with small capital.
No Need to Hold the Asset
You don’t need to store, stake, or transfer the underlying crypto.
24/7 Global Access
Crypto perps never close.
These benefits make perps attractive but they also require discipline and risk awareness.
CEX vs DEX: Where to Trade Perps
Perpetual futures can be traded on both centralized exchanges (CEXs) and decentralized exchanges (DEXs). Each model has pros and cons.
| Feature | CEX | DEX |
|---|---|---|
| Custody | Exchange holds user funds | You retain control (wallet → smart contract) |
| Liquidity & Order Execution | Often higher liquidity; robust order-book, market/limit orders, stop losses, etc. | Liquidity depends on smart-contract liquidity model; slippage and execution may be more variable. |
| Transparency & Custody Risk | Must trust the exchange; counterparty risk | Non-custodial, transparent on-chain |
| Regulatory / KYC Requirements | Often requires KYC / compliance | Typically permissionless (depending on jurisdiction) |
In 2025, decentralized perp trading has grown significantly, DEX perps are increasingly used by traders who value non-custodial control and decentralization.
5. Popular Beginner-Friendly Perp DEXes
Here are some exchanges (DEXs and CEXs) that offer perpetual futures, which a beginner might consider, especially if starting with small risk allocation:
dYdX — one of the leading decentralised exchanges for crypto perps.
Hyperliquid — also a popular DEX offering perps, known for good liquidity and competitive fees.
MetaMask Perps — leverages DEX infrastructure (e.g. via Hyperliquid) to allow perp trading directly from a standard wallet.
Traditional centralized platforms (CEXs) — many still offer perps with mature order-book and liquidity (though for the purposes of this article we focus more on the decentralised/modern angle, aligned with TokenHunters’ audience).
6. Step-by-Step: How to Open Your First Perp Trade (DEX Example)
This walkthrough applies to MetaMask Perps, Hyperliquid, and most modern DEX perp platforms.
Step 1 — Prepare Your Wallet
You need:
A wallet (like MetaMask)
Funds (usually USDT or USDC)
Make sure your wallet is properly funded before starting.
Step 2 — Connect to the Perp Platform
Visit the DEX, click Connect Wallet, and approve the connection.
Step 3 — Choose the Asset and Direction
Pick the market you want (e.g., BTC or ETH)
Decide whether to go Long (up) or Short (down).
Step 4 — Select Your Leverage (Start Low)
Most beginners start with 2× to 5×.
High leverage sounds attractive but increases liquidation risk dramatically.
Step 5 — Enter Your Margin
Your margin is the amount of your own capital you commit.
Example:
You enter $50 with 5× leverage → Your position size becomes $250.
Step 6 — Review Liquidation Price
The platform automatically calculates:
Liquidation price
Position size
Funding rate
Never open a position without checking where liquidation happens.
Step 7 — Open Your Position
Place the order (market or limit), confirm in wallet, and your trade is live.
Step 8 — Manage Your Trade
Monitor:
Price movement
Liquidation risk
Funding rate
Unrealized profit/loss
You can add margin, reduce leverage, or close the position at any time.
Step 9 — Close the Position
When you’re satisfied (profit) or risk is too high (loss), close manually.
Position closes → PNL goes to your wallet → You’re done.
7. Understanding Key Risks (Beginners Must Know This)
Leverage magnifies losses
A small price move in the wrong direction can liquidate your entire margin.
Funding payments can cost you money
If the funding rate is negative for your position, holding it long-term becomes expensive.
Liquidation risk is always present
Unlike spot trading, you can lose your whole margin even if the market barely moves.
Psychology matters
Perps can trigger emotional trading, revenge trading, over-leveraging, or impulsive decisions.
This is why every beginner must start slowly, use small capital, and focus on learning before trying to scale up.
8. Final Thoughts
Perpetual futures are one of the most powerful tools in crypto trading. They let you:
Go long or short
Use leverage
Trade without owning the underlying asset
Operate 24/7
Stay decentralized if you choose a DEX
But with these advantages come real risks. Beginners should focus on understanding how perps work, start with very low leverage, and never trade with money they can’t afford to lose.
If you’re ready to experiment with perps, do it gradually, learn the mechanics, and build your confidence step by step.
Need Help? Join the TokenHunters Community
If you want assistance setting up your first perp trade, want to discuss strategies, or simply want to meet other traders:
Join the TokenHunters Discord.
Our community helps beginners every day with:
Hands-on support
Trading tips
Risk management insights
Airdrop alpha
General blockchain education
Networking with other hunters
Whether you’re starting with your first perp or scaling into advanced strategies, the community is there to guide you.
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